As CMOs grab IT budget from CIOs, cloud CapEx and OpEx shift

By Bernard Golden, CIO |  Cloud Computing

2. This unpredictability will be exacerbated by the fact that these CMO-oriented applications, by their very nature, have much higher variability of load and user base. If your application is tied to a movie's release, and the star of the movie experiences a personal scandal that drives enormous interest in the movie, your app may experience 10 times the traffic you expected-and 10 times the cost for your cloud computing.

3. A third factor increasing the unpredictability of IT spending lies at the intersection of the decision-maker profile and cloud computing itself. CMOs frequently are presented with new business opportunities that don't fall neatly into "beginning of the year" launch timeframes. If it's a good opportunity, you want to pursue it right away, not wait for the next budget cycle.

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In the past, when you had to budget capital to pursue an opportunity, the process meant the increased spending was quite predictable, as it had to be planned for and slotted into the yearly budget. Today, when cloud computing makes resources available in minutes, there's little to prevent you from starting right away. Even if there's a budget forecast at the beginning of the year, you can expect significant variation as CMOs choose to pursue promising new business opportunities.

In short, the new world moves from predictable CapEx to unpredictable OpEx. You can expect many more midyear budget recalculations as cloud-based application costs move all over the map.

ROI, Not TCO, Drives OpEx Spending

TCO is the mantra of IT organizations. IT is a cost center, and it's a given that the focus will be on keeping costs down. The less you spend, the more that's available for the overall company's profit.

Consequently, IT organizations negotiate to keep costs to a minimum and are loathe to consider more expensive alternatives. After all, from an IT perspective, spending more on one product means having less to spend on another. This is particularly true in a capital-rationing environment.

If IT is allocated only a certain amount of capital to spread across all capital needs, then it's going to try and trim spending in every area to stretch the capital as far as possible. Generally, the most effective way to sell to a CIO is to offer a way of doing something cheaper than it's being done now, because that will reduce TCO.

Originally published on CIO |  Click here to read the original story.
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